With the nation facing a shortage of drivers and retailers scrambling to fill shelves and online orders, the spot market has gone "ballistic," according to Truckstop.com chief relationship officer Brent Hutto.
Spot loads were up 29% more during the week of August 31 compared to the same period last year, according to Cowen data. Double-digit percentage increases have been the norm in August and September, and those sky-high rates are excellent news for truck drivers.
Morgan Stanley's truckload freight index, which measures the supply and demand for semis, is at a decade high for this time of year, according to a September 2 update.
Truckstop.com's own market index has found the same unusually high demand amid a shrinking supply. "The incredible thing is the pressure in the market," Hutto said. "Since we've been measuring it, it's never been this hot."
A slump in the trucking industry last year and this spring forced tens of thousands of truck drivers to leave the industry. Hundreds of trucking companies went bankrupt in 2019 thanks partially to a major slump in manufacturing, followed by the pandemic induced recession.
There are signs that the market is recovering. Trucking and logistics companies have seen their stocks pop by 21.2% this year compared to the S&P 500 increase in 2020 of 8.6%, according to an August 27 Wolfe Research note.
But many of the truck drivers who left in 2019 and earlier this year aren't coming back, said Craig Fuller, CEO of trucking data company FreightWaves. Many simply retired: The average truck driver is in their early to mid-50s. Some trucking executives believe a large number of drivers are “sitting out” this early stage of the recovery, supported by expanded unemployment benefits and Payroll Protection Program (PPP) loans.
However, big-box retailers have seen demand soar this year, particularly online, according to Wolfe Research transportation analyst Scott Group. In the second quarter of 2020, major retailers spanning from Walmart to Nordstrom to Lowe's saw same-store sales tick up 11% and online sales pop 163%, compared to the same period last year.
But the surge in demand has met with a crunch in just how much inventory retailers have on hand.
Major retailers reported 12% less inventory from April to June of 2020 than the same period last year, Group said in his August 27 note to investors. "And when sales are really good and inventories are really low and shippers need to restock, freight can be off the charts like we're seeing right now," Group wrote. He expects that it will take until at least early 2021 for retailers to fully restock.
Until then, the US trucking companies which do a better job managing their capacity, can expect to see sustained profitability and increased rates.
Source: Business Insider